Tax incidence and price discrimination: An application of theories to gambling markets

This paper examines whether a casino tax is good for local welfare in a tourism economy. We find that what is important for efficiency is not the tax rate itself but the tax incidence on tourists. Casino tourism in Macao engages in price discrimination via market segmentation. We prove that, compared with the mass market, the VIP market will grow faster with a greater price rise if a tax hike on the VIP market is not large, but will grow less rapidly with a smaller price increase if the tax hike is very large. An empirical study is carried out using data from Macao, which is typical of segmenting markets for discriminatory pricing. We show that our theory is largely consistent with observed evidence. This paper also provides some policy recommendations useful for Macao. We propose that its casino tax should be kept low at its current rate in the mass market but be raised substantially in the VIP market if its economic growth is to be made less unbalanced and more sustainable.     

Trading volume theories and their implications for empirical information content studies*

Abstract. In this study we explore implications of extant trading volume theories for empirical information content studies. Using a simple general equilibrium model, we analyze and illustrate how trading volume reacts to information conveyed by an event. We show that a trading volume reaction to the release of an informational event is an increasing function of dispersion in belief changes among investors caused by information in the event, rather than belief changes per se. We also show that because of a possibility of no significant price change, a price effect study alone is not sufficient to accurately assess the information content of an event and a simultaneous volume effect study is necessary. Résumé. Les auteurs étudient les conséquences des théories existantes relatives au volume de titres négociés sur les études à contenu informationnel empirique. À l'aide d'un simple modèle d'équilibre général, ils analysent et illustrent comment le volume de titres négociés réagit à l'information transmise par un événement. Leur étude révèle que le volume de titres négociés par suite de la publication d'un événement informationnel croît en fonction de la dispersion dans les changements d'attitude chez les investisseurs attribuables à l'information que livre l'événement, plutôt qu'en fonction des changements d'attitude eux-mêmes. Elle démontre également qu'en raison de la possibilité qu'il n'y ait aucun changement de prix important, l'étude du comportement des prix risque de ne pas suffire à elle seule à évaluer avec précision le contenu informationnel d'un événement, et qu'une étude simultanée du comportement du volume de titres négociés s'impose.     

Retail power market competition with endogenous entry decision—An auction data analysis

Deregulation in the electric power industry has been aimed at promoting competition and thereby enhancing the industry’s efficiency. We use the auction data of public power procurements to study the impact of the reform on the retail power market in Japan. We quantify this impact by measuring a decline in power charges, controlling for the endogeneity bias caused by the entrants’ bid-submission decisions. Our results suggest that power charges would decline by about 0.48 yen/kW h on average when two or more providers bid at an auction.     

Mixed-frequency approaches to nowcasting GDP: An application to Japan

In this paper, we discuss the approaches to nowcasting Japan’s GDP quarterly growth rates, comparing a variety of mixed frequency approaches including a bridge equation approach, Mixed-Data Sampling (MIDAS) and factor-augmented version of these approaches. In doing so, we examine the usefulness of a novel sparse principal component analysis (SPCA) approach in extracting factors from the dataset. We also discuss the usefulness of forecast combination, considering various ways to combine forecasts from models and surveys. Our findings are summarized as follows. First, some of the mixed frequency models discussed in this paper record out-of-sample performance superior to a naïve constant growth model. Second, albeit small, the SPCA approach of extracting factors improves predictive power compared with traditional principal component approach. Furthermore, we find that there is a gain from combining model forecasts and professional survey forecasts.     

Using home-biased demand to test trade theories

Using Home-Biased Demand to Test Trade Theories. — This paper proposes a discriminating hypothesis that distinguishes between two paradigms of international trade: (1) constant returns and perfect competition (CRS-PC) and (2) increasing returns and monopolistic competition (IRS-MC). The discriminating hypothesis rests on the different degree of home bias among “consumers.” It predicts a positive relationship between a country’s share in world output and a country’s share in the world home-biased expenditure if the sector is IRS-MC and no relationship if the sector is CRS-PC. Accordingly, 7 sectors (covering 54.86 per cent of industrial output) of the eight countries under investigation were associated with the IRS-MC and 10 sectors (41.15 per cent) with the CRS-PC paradigm.     

How to assess the significance of export incentives: An application to turkey

How to Assess the Significance of Export Incentives: An Application to Turkey. - This paper analyzes the changes in the structure of export incentives in Turkey from 1983 to 1990. It shows that during the 1980s the level of the economy-wide subsidy rates and that of the inter-industry dispersion of incentives have substantially been lowered. Using the estimates of the effective subsidy figures it is shown that the Turkish export- and import-competing industries have benefited from the export incen-tives more than the other sectors. Finally, it is emphasized that the system of export incentives is too complicated and is therefore blurring the transparency of the incentive system.     

An application of the monetary approach to black market exchange rates

Zusammenfassung Eine Anwendung des monet?ren Ansatzes zur Erkl?rung von Schwarzmarkt-Wechselkursen. — Dieser Aufsatz entwickelt einen monet?ren Ansatz zur Analyse der Schwarzmarkt-Wechselkurse unter besonderer Berücksichtigung Indiens. Der Gleichgewichtskurs auf solchen M?rkten wird in einem Modell durch die Bedingungen des Bestandsgleichgewichts bestimmt. Berücksichtigt wird dabei das m?gliche Zusammenwirken zwischen dem Schmuggel und dem Schwarzmarkt für Devisen. Die empirischen Sch?tzungen lassen vermuten, daΒ die Ausweitung der Geldmenge im Inland und der internationale Goldpreis neben anderen Faktoren einen bedeutenden EinfluΒ auf den Schwarzmarkt-Wechselkurs in Indien haben.

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Résumé Une application de l’approche monétaire aux taux de change sur le marché noir. —Cet article développe une approche monétaire pour l’analyse des taux de change sur le marché noir en considération particulière de l’Inde. Dans le modèle, le taux de change d’équilibre sur le marché noir est déterminé par les conditions d’équilibre de stock. Le modèle permet l’interaction possible entre la fraude et le marché noir pour les monnaies étrangères. Les estimations empiriques suggèrent que l’expansion monétaire locale et le prix mondial d’or (complémentairement aux autres facteurs) ont une influence significative sur le taux de change sur le marché noir indien.

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Resumen Una aplicación del aprocha monetaria a las tasas de cambio del mercado negro. — En este artículo se desarrolla un aprocha ?monetaria? para el análisis de las tasas de cambio del mercado negro con especial referencia a la India. En el modelo, el equilibrio de la tasa de cambio del mercado negro se determina por las condiciones del equilibrio de stock. Se permite una posible interacción entre contrabando y mercado negro de monedas extranjeras. Las estimaciones empíricas sugieren que la expansión monetaria doméstica y el precio mundial del oro (agregados a otros factores) tienen una influencia significativa sobre la tasa de cambio de mercado negro en la India.

     

Socially weighted real income comparisons: An application to India

In an article in 1976, Amartya Sen develops a general theoretical framework for comparing real consumption over time and across countries that dispenses, in the words of Graaff, ‘with the time-honoured device of drawing a distinction between the size and distribution of the national income’. After developing a general theoretical framework taking distribution as an integral part of real income comparison, Sen applies it to a comparison of rural real consumption per head in Indian states in 1961–1962. In the present paper we show that the application of clustering techniques to Sen's data on Indian states provides an alternative way to partially order observations by real consumption per head within the framework of Sen's approach to distribution-inclusive measurement of real consumption. This alternative way has some desirable empirical characteristics. Second, we explore with factor analysis whether this alternative method yields sensible empirical interrelationships with other characteristics with which a priori reasoning and knowledge suggest it ought to be correlated. The results suggest that the cluster analysis applied within Sen's theoretical framework provides a valid way of comparing consumption levels.     

Gravity model: An application to trade between regional blocs

The objective of this paper is to evaluate the determinants of bilateral trade flows among 47 countries and, particularly, the effects of preferential agreements between several economic blocs and areas: European Union (EU), North-American Free Trade Area NAFTA), Caribbean Community (CARICOM), Centro-American Common Market (CACM), and other Mediterranean countries (MEDIT). The period under study is from 1980–99. The authors estimate a gravity equation that allows the comparison of the weight of the influence of preferential agreements and also, infers the relevance of other determinants of bilateral trade flows such us geographic proximity, income levels, population, and cultural similarities. The analysis is undertaken for each year of the sample in order to capture the temporal evolution of the impacts on trade of the different variables considered. Using the estimation results as a base, trade potentials resulting from new free trade agreements are calculated.     

Modern theories of regulation: An old story. Danish gasworks in the nineteenth century

Abstract

The Great Northern Telegraph Company was established in 1869 and enjoyed a very successful era thanks to a de-facto monopoly on the telegraph lines from Northern Europe to the Far East. After 1945 the Company changed its focus from telegraphy to wireless communication and electronic equipment. This article presents an analysis of the dramatic developments in the decades following the Second World War.

The relationship between the changing strategies and the established structure is analysed using Alfred D.Chandler Jr's well-known Strategy and Structure concept. After 40 years this concept still seems relevant to the understanding of the peculiar capacity for survival and growth demonstrated by old, well-established firms. In the conclusion it is argued that the post-war growth of the Great Northern Telegraph Company was based on several factors. These were the fortune originating from the Company's golden age in the 1910s and the 1920s, the industry investment strategy during and after the Second World War and finally, the changes of the organisational structure in the 1970s, which created the vital correspondence between strategy and structure.     

Real business cycles in an open economy: An application to Germany

Real Business Cycles in an Open Economy: An Application to Germany. — This paper discusses a stochastic, dynamic-optimizing model of an open economy. It is closely related to small open economy models, but differs by introducing an upward-sloping supply curve of foreign bonds. The model is calibrated to match the long-run features of Germany. The simulations show that the model is consistent with the observed regularities of German business fluctuations.     

Intermarket network externalities and competition: An application to the media industry

Intermarket network externalities occur when the utility of a good produced in a given industry varies with the size of the demand for a good produced in another. A particularly significant example of this phenomenon is provided by the interaction between the media and advertising industries. Media consumers vary according to their willingness to pay for a media good, which depends on the advertising volume. In the advertising market, advertisers vary according to their willingness to pay for an advertisement, which also depends positively on the audience reached. We model a situation of competition between two content providers who are rivals in both the media and advertising industries, choosing simultaneously the newspaper prices and the advertising rates. We characterize the equilibria of the game and explore how they depend on audience attitudes towards advertising. Our main finding is that two-sided interactions may induce exit by one of the media companies from either only the advertising market or both markets.